The article says that the Yankees have increased their line of credit from $175 million to $300 million.
A few things.
1. They likely already use a good portion of the original $175 million to fund team expenses during the year.
2. This kind of a line of credit is typically used to smooth over differences between when cash is earned by a company and when cash has to be paid for expenses. In other words, at times during the year, after they receive a lot of cash, the borrowing amount probably drops at or near zero. At other times, after they've paid a lot in cash, they will borrow against the line.
3. Typically, a well run business will arrange for more borrowing capacity than they think they will need in order to cover any surprises - e.g. if the total borrowing amount is $175 million, it's likely the Yankees don't expect to need more than $100 million or so but will want to have the flexibility to borrow the additional $75 million just in case. Sometimes, however, businesses will run deficits and use the line as capital. In this case, they will typically need to increase the size of the revolver or replace some of it with other capital.
4. The Yankees can probably also use this line of credit to borrow quickly to fund a long term project (e.g. the land for a stadium).
5. The Yankees wouldn't ask for an increase like this just because they were going to sign a new player - an extra $25-30 million in expenses wouldn't require an increase of $125 million.
All this suggests they are either running deficits and increasing borrowing (unlikely), or they are going to make a big capital expense and want extra dry powder to have the flexibility to do so quickly. My guess is that the extra $125 million is their portion of the amount to buy land for a stadium, but not to construct a stadium itself.
A few things.
1. They likely already use a good portion of the original $175 million to fund team expenses during the year.
2. This kind of a line of credit is typically used to smooth over differences between when cash is earned by a company and when cash has to be paid for expenses. In other words, at times during the year, after they receive a lot of cash, the borrowing amount probably drops at or near zero. At other times, after they've paid a lot in cash, they will borrow against the line.
3. Typically, a well run business will arrange for more borrowing capacity than they think they will need in order to cover any surprises - e.g. if the total borrowing amount is $175 million, it's likely the Yankees don't expect to need more than $100 million or so but will want to have the flexibility to borrow the additional $75 million just in case. Sometimes, however, businesses will run deficits and use the line as capital. In this case, they will typically need to increase the size of the revolver or replace some of it with other capital.
4. The Yankees can probably also use this line of credit to borrow quickly to fund a long term project (e.g. the land for a stadium).
5. The Yankees wouldn't ask for an increase like this just because they were going to sign a new player - an extra $25-30 million in expenses wouldn't require an increase of $125 million.
All this suggests they are either running deficits and increasing borrowing (unlikely), or they are going to make a big capital expense and want extra dry powder to have the flexibility to do so quickly. My guess is that the extra $125 million is their portion of the amount to buy land for a stadium, but not to construct a stadium itself.
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